Work In Progress

Term Definition
Work In Progress also referred to as WIP, in project management and professional services context, is the amount of work performed that has not yet been invoiced. For a time and material project WIP can be calculated as follows: WIP = billable hours of work done x hourly rate + any billable expenses incurred that have not yet been billed. A project may be based on a fixed bid, milestone billing or other criteria for assessing the value of work delivered, in which case the calculation of WIP is based on % of work completed and the identification of billing milestones achieved. WIP is updated as actual client billing (invoicing) occurs. Companies that have a material amount of WIP at the end of a financial reporting period must disclose the WIP along with any notes that describe the nature of such projects (any notable collection or delivery risks). WIP appears as an asset account (a balance sheet item) in financial reports. When the client is invoiced WIP accounts are reduced by the billed amount, offset by a corresponding entry in a revenue account now that the revenue can be recognized. Most service organizations use a combination of spreadsheets and meetings to decide on what WIP should be reported. Professional Services Automation software applications formalize the process of work in progress and revenue management, and automate the process of revenue recognition, WIP transaction tracking, and general ledger transactions to facilitate project financial reporting.

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